It’s already May. In just another month we will have already finished the first half of 2021. I am kind of happy that time is moving so fast now, because this whole COVID situation just doesn’t seem to end.
But COVID or not, the world doesn’t stop turning and one of the most exciting investment frontiers is gaining more traction. As I wrote last year about investing in space, today I’d like to share the updated infographic from one of the most devoted space investment specialists: Seraphim.
Not all of these companies are publicly listed. Some are even still simple startups. But this smart overview can give you more ideas how vastly diversified this sector already is, and what opportunities lie ahead of investors who are willing now to take the first steps.
April is coming to an end, which means that a third of the year has already passed. In as little as two more months we will be through the first half of the year. What started out more on the optimistic side is now back to where we were almost a year ago. At least here in Thailand.
But you wouldn’t know that if you would pay attention only to the stock market. Most company shares have recovered, and even grown beyond their pre-pandemic levels.
The explanation for this is multi-faceted, but given what I can see from my own company and competitors, it’s a mixture of pre-mature optimism, and the now all-too popular FOMO. Fear Of Missing Out.
Most investors I know are optimists. Most tend to be a little greedy. And, unfortunately, many are trying to time the market. When the crisis started and markets fell by 30% or more, many saw a great buying opportunity. Myself included. The expectation was that a pandemic can’t last that long. Many of us didn’t actually believe it to be real. Or at least not ‘that’ bad.
Plenty of us tried to estimate the lowest possible market point, and then started to get back on the train. The more people started buying, the quicker shares started to stabilize, until demand overtook supply, and prices started to rise. Then FOMO kicked in. People noted the turning trend, and scared of missing out joined in the purchase frenzy. This is how we got here.
So far, this optimism has served us well, but the long-term success will depend on how things play out in the next 2-3 months. The US, Europe, and leading economies of Asia need to show that they can control the situation without sacrificing their economies. Otherwise optimism might turn into disappointment, and drag the market down once again.
What’s the plan?
For the young investor who is not in any financial distress, the simple strategy is to just hold your ground. It’s impossible to predict what and how it will happen, but for the long-term focused investor it doesn’t really matter that much. Stay your ground. When shares go up, enjoy. When they go down again, look out for the next buying opportunity.
For those who might have cash issues, this may be the time to trim some positions for shares which reached their all-time highs. Put some cash aside, re-fill your emergency fund, and be patient. You will sleep better at night.
I often get questions from friends and colleagues about investments in cryptocurrencies, mainly BitCoin. Given the daily amount of news and reports about the BitCoin craze, it’s understandable. It’s almost impossible to not hear about BitCoin these days.
To give it right away: I am not invested in BitCoin, or any other cryptocurrency for that matter. I also don’t speculate with any other currencies on the FOREX market.
The blockchain technology is a very interesting development that will find, and in some instances already found its way in some form into business and into our society. BitCoin is only one of the first products to put that technology to use. But very few people who invest in BitCoin actually really understand what it’s about. Most investors today are simply following the upward trend, and speculate that it will continue to grow for some more time to come.
Looking at the chart, it’s hard to deny that investing in BitCoin so far has been a great way to multiply your money. The big question for investors is of course whether this trend will continue, or not.
Investing in BitCoin is easy. Now.
One reason why BitCoin has moved up significantly in just such a short amount of time is the recently developed ease of access to it. It’s easy to look at the chart and to say: Why didn’t I invest in BitCoin much earlier? Well, it’s really simple. Investing in BitCoin was previously not an easy thing to do.
I was looking into investing in BitCoin some 5 years ago. My journey to invest in BitCoin started like this:
First I needed to find a trustworthy digital wallet. Then I needed to transfer money to that digital wallet. In the final step, I needed to purchase BitCoin through that digital wallet.
The challenges that came with it were however pretty significant: I needed to make sure to safely store (and not to loose) the wallet number, which was a complicated compilation of numbers, letters, and individual characters. That digital wallet number was not retrievable in case of loss.
I also needed to make sure to have a bullet-proof password to it, AND that I don’t forget or loose that password either, because it would also be not retrievable in case of loss.
I needed to somehow try to verify that the digital wallet I decided to use was actually a trustworthy, real offering. That was pretty hard, because there were a lot of scam companies out there and no serious verification system that one could have relied upon.
So there was a real risk to BitCoin before the actual buying process, and even beyond after the purchase, due to the limitations on the quality and trust into the digital wallet. I remember that I did open an account with a digital wallet provider, but the amount of disinformation and misleading data on the internet, the lack of reviews and guarantees, it just made it really hard to believe that my money would be in any way protected if I transfer it to any of the accounts out there. This reason alone was the main reason for me to not invest in BitCoin at that time.
This hurdles have been overcome by now. Access and purchasing have been simplified, there is more trust in the process. But that was not the case 5 years ago.
We can’t really do any analysis on the fundamentals, because there are none. It’s not a company, there is no product or management team behind it. It’s simply a scarce resource that is currently of interest.
Similar with other currencies, its value hinges on people believing in it. And to be fair, there are plenty of people believing in BitCoin. Right now. The easier access allowed more people to get invested. The media is pushing it. And many even prominent skeptics have changed their opinion in recent years, as cryptocurrencies gained more and more drive and appeal among investors.
An argument that I heard very often is that all the millionaires and billionaires in the world are invested in BitCoin, so it must be a reasonable place to park your cash.
To the “rich people” argument, let me say that most of those millionaires and billionaires didn’t get rich with BitCoin. Most of them got rich with their own companies, or with stock investments. They invested in BitCoin after they were already rich, and had therefore much less worries whether their investment would go well or not. They were willing to accept a high risk factor, because they didn’t care that much to loose a couple of thousand Dollars or Euros. Most small investors cannot afford such a high risk-reward ratio.
The risks of an investment in crypto-currencies are still very real. Here just a few arguments to make:
The value of the currency depends on people believing in it. This believe might be weakened or even disappear when another, better and/or smarter cryptocurrency enters the market.
The most rigorous believers in BitCoin assume that it will at some point become a viable world-currency, free of government regulation and in tight control due to its scarcity. There is however valid reason to believe that most governments will regulate BitCoin at some point and introduce their own versions of digital currencies. No government in the world can afford to loose the power to monitor and control their cash flow and supply.
BitCoin prides itself in its anonymity, but the blockchain ledger is in fact an open-source controlled system, and not anonymous at all. Admittedly, it would require a significant amount of time to track BitCoin owners through the ledger, but it’s certainly possible, and with our ever-expanding computing power, it’s just a matter of time for systems to be developed that will be able to track owners throughout the chain.
The ever-rising price is not positively contributing for BitCoin to become a real alternative payment method. Why would anyone use BitCoin to buy any product, if the value of the BitCoin keeps increasing day by day?
BitCoin is an electronic system, and those can be cracked or infiltrated. We might need to get into quantum computing to get the computing power necessary to pull this off, but we are almost there. Slipping in a virus or a bug into the system could crack its security, expose owners, or allow BitCoin to get stolen. Of course, every bug or virus can also be corrected or eliminated, but a major event similar with a “bank robbery” could quickly undermine the trust in the entire BitCoin system and put pressure on it.
There is a great list of arguments and counter-arguments to be found here: https://safehodl.github.io/failure/ I would encourage everyone interested in BitCoin to go through the comments and to form your own opinion on whether you believe in the upside or downside of it.
Should you invest in BitCoin?
If you follow the link above you will find plenty of smart arguments from both side of the aisle, that can help you making an informed decision.
Personally I don’t intend to invest in BitCoin because it doesn’t fit into my investing strategy. I buy great companies at a fair price, and enjoy benefitting from real-life products and real-life profits in the form of dividends that I receive. BitCoin doesn’t produce anything and doesn’t offer any service that I would consider useful (for now) to see it as a viable investment. This may change over time of course, but for now this is where I stand.
What I would however explore instead (and I will) is to dive deeper into the blockchain technology, and to invest in an ETF that would focus on companies that utilize blockchain for their products and services. This is because I am not as much interested in BitCoin, as I am interested in the technology behind it.
The blockchain technology has certainly more aspects to it, and in the long-run investing in companies that can utilize this technology will offer a better risk-reward ratio, than a hyped digital-currency.
I somehow managed not to write an article for a whole month. No excuses, but I was busy. I got occupied with my wife’s smoothie business, I had to make a 1-week business trip to Krabi and Koh Samui, and my head office in Bangkok had plenty of requests for me to work on. My daughter required a little more attention, my dog had his final moments and sadly passed away after almost 18 years of companionship. March was a little overwhelming.
Most of the little free-time that I had left I spent at the gym. Turning 41 must have triggered a tiny midlife crisis in me, because recently I not only started visiting the gym more regularly. I even started applying face cream. Yes, I know. I might be late to the party but previously, I never actually considered doing that. Instead, I enjoyed getting to look older for the last 5 years or so. I don’t know, but all these small wrinkles, I always felt like they would add more character to the picture. This changed last month.
Anyway. That was some thoughtful introduction. Now back to finance.
With all my portfolios back in the greens, I call the market crash over. Done. Finished. History has once again proven reliable, and the stock market showed a pattern that experienced investors appreciate for many decades now. There is always a crash. And there is always a recovery. Once again those who trusted in the market and kept steady or even invested during the crash are now coming out stronger, and wealthier than before.
Don’t blame yourself if you missed out on the action. It might have been just the first round for you, but it surely won’t be the last. We don’t know when the next crash will come and it’s impossible to time the market. But history is teaching us over and over again, that there is no bad time to start investing. In the long-run markets tend to go up more frequently, and stronger if compared with the downturns. So when stocks do go down, it’s usually a good time to be looking out for great companies at fair or even at cheap prices. In the meantime, you can keep investing anyway.
The market was rising strongly for a few weeks now, and it’s very likely that it will continue to rise. Unless of course we get another pandemic, a war, or any other kind tragedy that would put the world in turmoil.
I am rather optimistic, by nature, mostly because the US has a reasonable person back at the top. President Biden is more predictable, communicates smarter, and pays attention to the world as a whole, in stark contrast to his predecessor. At the same time he is tackling massive investments in his countries future, which should push the entire world into a competitive streak of investments that will benefit a wide range of corporations globally. Investments create cashflows, revenues, salaries. These in return curb consumption, spending. That’s how the world works, and that’s why investors keep winning.
So if you are already invested: Enjoy the change of winds and watch your portfolio recovering or growing. If you are not invested yet, now is as good as ever. You might have missed the speedy recovery, but the opportunities are endless.
In the world of finance, we have many strategies, many different financial instruments, and thousands of advisors who will be telling you to have a unique way of making a fortune. Some might be the right people with the right tools. Sometimes. Other tools or people can be wrong, are known to be flawed, or come down to a pure gamble.
Every investor has the opportunity to try out all these different ideas, tools, and strategies, as long as he or she has the money to do so, and of course, if he or she is willing to take the risk. But if you don’t see yourself in this category, there is still a way to become an investor. A successful one. And it’s surprisingly simple. No one else put it better than Warren Buffett:
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
While the context of this quote was referring to the topic of value investing, it still includes a simple message: When you invest, you should focus on buying great companies at a fair price.
This simple formula was the reason for Buffett’s success. There are of course a few more points to it, and it all doesn’t guarantee that you will become another super-rich person. But most of these rules are nothing else but common knowledge and by following them you will significantly improve your opportunity to do financially better.
So when I advise investing, I am not promising anybody to become rich. Instead, I am promising to increase the odds. By a large margin.
Increasing your financial well-being without investments puts you back at the odds of a lottery win. That’s 1 in 13,983,816 (according to Google). Now it’s hard to put a number on the odds of becoming rich through investments, but history and statistics put them significantly higher than that. I recommend here a short read to put it a little better into perspective. Better than I could write it here on a lazy Sunday afternoon.
So the message of this post is: When you invest, don’t do it for the promise of becoming rich. Do it for the purpose of increasing your odds to improve your financial well-being. That’s why investing is for everyone.
For humans, the world is full of problems and all of these problems require some kind of a solution. The good news is that we as a species already accumulated a vast range of knowledge about most of our every-day problems, and how to solve them.
The bad news is that humans are not only slow learners with inconsistent memory functions. We are also easy to be influenced by others, and unfortunately, these “others” don’t always have our best interests at heart.
Let’s take a look at the concept of investing. As I wrote in my to date most popular article “Nobody wants to get rich slowly“, investing in the stock market is a fairly easy and straightforward process. The modern tools that we have at our disposal, namely easy access to information via the internet, access to the stock market, and to the right products (like ETFs), can help everybody becoming a successful investor.
But of course, everything simple can also be made more complicated. The world of investors today is not only about buying and selling stocks and ETFs, but the financial industry has added countless additional products to the mix. From FOREX trading to CFDs, short-selling, and BitCoins. Things can get pretty complicated.
Keeping things simple
I invest in single stocks and in ETFs only. I don’t trade with foreign currencies, I don’t put bets on the futures market, I don’t purchase digital coins, and I don’t engage in short-selling. Am I losing some opportunities along the way? Possibly. Does it bother me? Not a bit.
I like to keep things simple, and investing per se is a simple process. I do my research and then I purchase shares of a company that I believe has a bright future ahead. If I can’t find enough information about a specific company or can’t focus on one, I will look for an ETF that might cover that specific market group, and I invest in that ETF. That’s it.
It’s pretty rare that I sell any stock unless it made me a significant profit. Even then, I won’t sell the whole position, but probably only some part to free up cash and to buy the next stock or ETF.
My target is to grow my portfolio and to build up my stream of passive income via dividends. Ultimately I want to retire with sufficient passive income to not care about any government money or support from others. I want to be financially free and independent, and I still have plenty of years ahead of me to get there. History taught us that investing in stocks is the single easiest, most reliable process to reach this target.
Impatience and greed
But of course, there are some obstacles along the way, and the biggest ones are our own emotions, namely the feelings of impatience and greed.
Most companies don’t grow overnight, and the perspective of waiting for 2, 3, 5, or even 10 years for a breakthrough and the ultimate success is not easy for everyone. It can feel tempting to try to speed up the process with some CFDs and bets on the future, to hedge against losses with some short-selling options, or to divert some funds into bitcoins with the hope for a quick boost to your net-value.
And yes, there definitely are opportunities that I might be missing out on. But for me, it’s just not worth the headache, mainly because the trading frame is too short and the risk-reward ratio is not appealing enough for me.
I don’t want to trade stocks daily or even weekly. I don’t want to be forced to follow every single news-flash to be able to quickly react in a fast-paced environment. And I don’t believe in every single new trend is being said to become the next Trillion-$ market. So why would I give myself all these troubles, especially while knowing well that the simple investor approach that I am following now is historically also the most reliable one?
There is also the fact that while most of all these other opportunities in the financial industry offer viable options to make profits, they often also offer the possibility to lose your hard-earned money even beyond the originally invested amount.
Last but not least I am also perfectly aware that the main reason for the financial industry to push and empower a fast-paced environment is because they earn more in commissions and trade fees if their customers are more active.
Do your thing, but keep it simple and keep your emotions in check
I am not saying that people shouldn’t try other investments or explore other potential opportunities in the financial market on their own. Everyone can find a different path to success, and some products and concepts will work better for some than for others.
But no matter what you plan to do, learn from others who walked that path successfully, try to keep things as simple as it gets, and keep your emotions in check.
Finally. 2020 is gone and 2021 has begun. And the start couldn’t be more promising. A little rough, and it’s also affecting me and my journey, but promising nevertheless.
Let’s start with the biggest drama, the virus. COVID is not gone. In fact, it seems to get worse, but it’s not that we wouldn’t have expected that. Most of us make a big deal every year at the end of each and every year about things coming to an end, starting new, new year’s resolutions. But in reality, the next day after the 31st of December is just that. Another day. Another sunrise. Nothing more than another shift in the tides of time. So why should have anything changed in comparison with the day prior to January 1st, 2021?
Correct. Nothing changed. COVID is still spreading and to top it off, there seems to be a slightly mutated version of the virus going around. Spreading faster, it seems to be more difficult to track and isolate.
Japan has declared a state of emergency, China is once again shutting down regions, towns, and cities, and even Thailand came back into a de facto lockdown. The authorities are very cautious in not calling it a lockdown, but the measures in place include massive restrictions on travel, business, and semi-curfews. So I guess using the term “lockdown” is debatable, but certainly not too far off.
And of course the big elephant in the room. The US is in its final days of getting rid of Donald Trump. There is no question that he is leaving a legacy, but in my wildest dreams (or should I say nightmares) I wouldn’t have thought to watch the news and to see what is unfolding in the “oldest democracy in the world”. Shocking. But not surprising. I mean seriously folks. Electing a real-estate shark for president, what would you expect? And it’s not just any real estate guy. It’s one of the worst that ever walked the globe.
Trading the future
Having said all that, expectations are positive. We all know, things need to get worse before they can get better, and the way I see it, we are about to reach the peak of the crisis.
Infections are on the rise, but so are vaccines. Several types of vaccinations are being distributed and administered across the globe, and the ramp-up will only get faster from here. We know there is a life after COVID, and it’s clearly visible on the horizon.
MAGA supporters had a short uprising, but it seems they had not enough support, no real plan, and they were badly organized. So this ended rather quickly. The way I see it, all they did was to bring the Republican party on the brink of collapse. This brings not only a definitive end to Trump and his presidency but potentially also to any other political aspirations anyone in the Trump family might have (had).
So, we see all this happening, and we know that the future will be better. Therefore stocks are rising, and investors are preparing for a bright and profitable second half of 2021. And so am I.
First things first: Merry Christmas everyone! Nevermind where you live, Christmas is probably not as it’s supposed to be. And neither will be the New Years Eve event. COVID infections worldwide came roaring back across the globe and have crippled public life once again. Even in countries that previously did well in handling it. Yes, even here where I live, in Thailand.
So, while everyone is awaiting the vaccines to roll-out on scale, we have to remain cautious and vigilant, and hold the line until we get through the worst part of this pandemic. My personal expectation is set around the target date of sometime around May 2021.
2021 will get better
I am pretty optimistic for the next year and expect things to get significantly better. While the economic crisis has shattered businesses and destroyed livelihoods, there is a positive effect to it.
As bad as it may sound, the crisis has cleared the market of many weak companies. Stronger companies discovered weak spots and dependencies that had to be addressed. People have realised that some business models are not as bullet-proof as they thought, and some traditional business partners are less reliable and trustworthy than one would have expected. Those who get through this crisis will come out stronger on the other side, new alliances and partnerships will be formed, and unproductive and inefficient constellations have been abandoned.
For investors, these are good news. Especially for those who invest long-term. Getting through a crisis on this scale builds trust and confidence. This in turn will support pricing of shares and dividend payments. The recovery will come.
That is unless…
But of course, the very first thing that COVID taught us is that such dramatic events often come unexpectedly. And while we might indeed be done with COVID sometime next year, the world is far from secure from other crises that might happen right after that. Whether it’s another virus, a military conflict on a global scale, trade-wars, who knows. Everything can happen.
However, the smart thing to do is to remain optimistic. Historically and statistically, optimistic investors fare better and end up better off than pessimists. Always. Because unless the world literally collapses, markets do recover. Businesses adapt and come back. Innovation never stops, it’s part of our DNA.
So with these positive lines I like to say thank you to all my readers for following this blog in 2020, and I am looking forward to keep writing for you also in the coming year. What can you expect from me in 2021?
I will continue writing about financial independence. As you know, my target is to become financially independent, and I intend to reach this target by investing in stocks. This will continue and I will keep writing about it.
I will start writing about investing in stocks in Thailand and about Thai companies. In 2020 I have opened an investment account for my wife and for my daughter here in Thailand, and started investing on their behalf with surprisingly good results. The experience I gained through this will be something that I like to share with other potential investors, especially those who are living in Thailand.
I will start writing about how to set up a business in Thailand. Currently my wife is about to open a small business, a health-food cafe with smoothies and smoothie bowls. We are working on it together and learning a lot about how to open a small business here. We are in the final stages now, but once setup and done, I will share the experiences made along the way in a few articles.
So this is it! Goodbye 2020, hello 2021!
I am wishing you all a healthy and successful new year ahead!
As the year is coming to an end, it’s time for a portfolio re-evaluation. I do this every year in order to determine what I did good, bad, or just wrong, and what I can and should do better in the next year.
Keeping a cool head
I wrote it many times. When it comes to investments, you need to keep a cool head and take emotions out of the equation. You need to stick to your thesis and know that you’re in for the long run no matter what. But this is easier said than done.
When your shares are moving up for a while and you see your profits surging by 20%, 30%, or even 50%, you might feel the urge to sell your shares just to make sure that you can actually keep that profit. I call this phenomenon “negative greed”. It’s greed because you want to keep the profits, and you want to make sure that your account gets credited before anything happens to it (like another downturn in the market). But it’s “negative” because once the shares are sold, you have obviously no more shares that could grow even further from there. You secure profits, but you lose chances for more profits.
Similarly, when your shares are moving down, it’s hard to stay cool while watching your account going negative into the double digits. When a recession hits and all you can see is a screen with red numbers on it, thoughts will crawl into your head. Thoughts, that question your decisions, making you wonder whether that whole thing is just a big scam that you fell for, and that you should have better listened to all your non-invested friends who think you’re nuts for being an investor.
On both counts, I did quite well in 2020. While I experienced all the emotions and drags as described above, ultimately I kept a cool head. The only shares I sold were those of Apple (AAPL) after the stock-split. They soared by over 150% and I sold some to be able to buy a few new shares of other companies which I considered to be good opportunities. What did I buy?
Wereldhave – A dutch shopping mall operator who suffered dramatic losses in its share price in recent months and who is due for recovery once this whole Covid drama is over
Starbucks – The company is showing over and over again that it’s one of the best in the market. The pandemic didn’t hit it as hard as one would have thought, and it will come out stronger in the aftermath
Veolia – After watching a documentary on Netflix about drinking water (the show is called “Explained”, highly recommendable) I decided to start focusing more on water-related investments
I also started a savings plan into an ETF. It’s called “Xtrackers MSCI World Information Technology UCITS ETF 1C” and it’s focused on tech-investments world-wide. 100 Euros a month that have started to flow into this ETF, completely paid by the dividends I receive each month.
One more word about Wereldhave. I had this company in my portfolio in the past, and I sold it at a loss when they cut the dividend and when the covid crisis hit. But I kept it on my watchlist and observed the stock movements on a weekly basis. When I noticed that the stock stopped moving further down (after dropping more than another 50% since the time when I sold them) and the company announced a new management team as well as a full restructuring of their business model, I got back in. The shares are now up 40% since I bought them.
In terms of dividends, Starbucks and Veolia will contribute to my annual income in 2021 as they both pay stable and each year growing dividends. Wereldhave used to pay a strong dividend until the crisis hit. They canceled all dividends in 2020, and I don’t think the company will be able to pay out any dividends in 2021. I expect them though to start paying dividends again sometime around 2022.
My dividend income shrank in 2020 compared with 2019. This was mainly due to my largest and also most disappointing investment: A company called Aurelius (AULRF). It’s a business development company (BDC) which I purchased back in 2018. It was showing not only superior growth opportunities but also had an amazing dividend yield, and since 2018 it developed into my single largest holding position.
Unfortunately, it also became my most disappointing investment. The share price dropped by almost 70% and the dividend was cut down to zero in 2020. However, in the last couple of weeks recovery started to kick in. My losses are now at -56% and given the recent business reviews, I am quite confident that shares will continue to tick up. Also, the dividend should recover in 2021. But I admit, this one is my single largest nail-biter.
Overall it looks like my dividends year on year will reduce by some 11,60%, and this despite the growth of my total invested cash by 8,99%.
Monthly passive income
The total decline of dividend payments by 11,60% is obviously not great, but overall, my monthly passive income remained largely stable. My total dividend yield on investment came down to 3,22% from 3,97% in the year before. For 2021 I expect it to move back up into the 3,5% to 3,9% range.
Considering the scale of the covid crisis, I see my thesis of investing and putting money to work in the stock market confirmed. And 2021 is almost guaranteed to produce similar or better results, with most stocks set to soar once the vaccine distribution starts kicking in.
Today is the 14th of November 2020, and what a year this has been! With only 6 weeks to go and all the bad news going on, all I want at this point is for it to end.
Whatever your idea or opinion about the Coronavirus might be, we have to acknowledge plain facts that it had an immense impact on literally the world as a whole. This is beyond anything my generation experienced so far.
Jobs were and are being destroyed, incomes diminished, entire industries shut down, and thousands of people are still dying across the globe. And just to be clear: Whether it’s a direct or indirect count, if the virus triggers the death, then it’s on Covid to me.
Since I am working in the hotel industry, I am directly affected by it. In order for my business to survive, I need to cut expenses, reduce jobs, reduce salaries. It hurts. It’s many tears and many broken hearts. Many tough decisions every single day. And despite having the promise of a vaccine now visible on the horizon, we still have a few more months of pain and suffering ahead.
Also let me share with you this: As a business insider in an executive role, I can tell you here and now that this won’t get better any soon. Even post-covid. For most, the jobs that were cut aren’t coming back. The recovery of the service industry, the largest industry in the world, will take years. In order to survive cost cuts will remain in place until further notice.
Financial independence has never been more important
What I am sharing and trying to explain above is that the world is not going to get really significantly better any soon. And even if, how do we know that there won’t be another outbreak in one, two, or five years from now?
We have learned that there is no such thing as invulnerability. There is no such thing as total job security. And when times get really tough, even the best employers might be forced to make some tough choices to the detriment of employees.
Business owners face even greater risks, especially when they operate on thin margins and have not sufficient funds to survive prolongued periods of time without a regular income.
So what are our choices? How can we financially prepare for such an event?
There aren’t many choices, frankly, and there is no single solution. What we have to do is to create layers of protection. To create multiple income streams. And being invested in the stock market is one such strong layer. Also during the current crisis, it has again shown to be a reliable protection for tough times.
I am not talking about the value of my shares. I am down 25% in my portfolio so far. What I am talking about are dividends, my passive income stream.
Let me compare it with my salary, which is currently being cut by 25%. Next month it will be probably around 30%. At its peak, the cut was at 40%. But my dividends have decreased by only 11% year on year. And while I am not certain about my salary, I am quite confident for my dividends to fully recover next year.
Some of the most reliable dividend companies have not changed their policies and kept paying the same or even increased amounts throughout the crisis. This has again reconfirmed with me that for those who seek financial independence, being invested in the market is essential.
This crisis has been a huge reminder that we need to take responsibility for our financial well-being into our own hands. We can’t always rely on others, not to mention governments.
And it’s not just about the money. It’s about having that pressure off your chest, knowing that you have one more layer of safety, one that will contribute to protecting you and your loved ones when times are tough. This feeling alone is beyond any monetary value.